COP, Valero & other US refineries slash utilization & production to help economics

[Charles Randall]

ConocoPhillips, Valero, Slash Refinery Production (Update1)By Aaron ClarkJan. 28, 2009 (Bloomberg) — ConocoPhillips, the second largest U.S. refiner, expects refinery utilization rates near 80 percent during the first-quarter due to planned turnarounds and hydro- skimming economics. Valero Energy Corp., the largest U.S. refinery, said yesterday average utilization rates for its fluid catalytic cracking units, which help make gasoline, are between 70 and 75 percent of capacity.
“I think they are smart business people,” said Peyton Feltus, president of Randolph Risk Management Inc. in Dallas. “Demand is down. Refiners have gotten a profitable crack spread back by reducing capacity, so why ramp up and ruin the market that they have worked hard to improve?”
The crack spread, or margin for turning three barrels of crude into two of gasoline and one of heating oil, rose 32.28 cents, or 3.7 percent, to $9.7382 a barrel at 9:59 a.m. It rose to a six-month high of $18.297 on Jan. 15, based on New York Mercantile Exchange futures prices. It averaged $4.542 a barrel in the fourth quarter.
Refineries probably operated at 82.8 percent of capacity last week, down 0.5 percentage point from the week before, according to the median of 13 analyst estimates in a Bloomberg News survey. Refineries reduced operating rates by 2 percentage points the previous week.
To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.netLast Updated: January 28, 2009 10:12 EST

 

[Charles Randall]

Here is update news article about refineries keeping utilization rates at or below 80% to help stabilize margins/cracked spreads.
 
The US petcoke production has been at 2004 levels for the past 4 years despite the addition of several new cokers and expansion of existing ones along with other key units like FCC and crude units which also debottleneck the coker. The Utilization has been between 82-87% compared to 92-98% between 2000-2004.
 
 It doesn’t look like petcoke production level is going to break out of  ~39-40 million mtpy level of 2004 during 2009 given the low utilization likely for 1Q09 and limitations of low demand going into peak gasoline season for 2Q09. Given the steep decline in petcoke prices and rapid rise in refinery inventories perhaps it is fortunate in the short term but it sets the stage for another correction when margins & utilization return to normal and no new markets have been established for the ~ +5-7MM mtpy of additonal petcoke prodution – most of it as low value fuel coke at 6.5%S.
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